Machine Rate Estimates and Equipment Utilization

Abstract

As mechanization increases, the percentage of the total cost of the logging operation due to equipment purchase and operation increases. This makes assumptions about machine life, machine maintenance costs, and fuel consumption more critical in understanding the costs of logging operations. For many years machine rate calculations have followed a fixed format based on the concept of scheduled and productive machine hours. When equipment utilization is less than 100%, the traditional machine rate calculation assumes that the machine continues to depreciate and machine wear occurs during the non-productive time at the same rate as during the productive time. This can lead to overestimates of the hourly cost of machine operation by effectively shortening the machine lifetime productive hours as the utilization decreases. The use of inflated machine rates can distort comparisons of logging systems, logging strategies, equipment replacement strategies, and perhaps the viability of a logging operation. We propose adjusting the life of the machine to account for non-productive time: machine life in years should be increased with a decrease in machine utilization, while cumulative machine life in hours remains the same. Once the life has been adjusted, the traditional machine rate calculation procedure can be carried out as is normally done. We provided an example that shows the traditional method at 50% utilization yielded a machine rate per productive hour nearly 30% higher than our modified method. Our sample analysis showed the traditional method consistently provided overestimates for any utilization rate less than 100%, with lower utilization rates yielding progressively increasing overestimates. We believe that our modified approach yields more accurate estimates of machine costs that would contribute to an improved understanding of the machine costs of forest operations.